Mumbai: Finance minister Nirmala Sitharaman‘s announcement of a Rs 100-crore incentive for municipal bond issues above Rs 1,000 crore could act as a catalyst for the BMC, which began groundwork to enter the bond market.Officials said the civic body is currently in the accreditation and credit rating process, a mandatory requirement before any bond issuance. The process is expected to take 1 to 2 months, following which the BMC could move towards listing bonds with fixed interest rates.Among the key instruments being explored are “blue bonds”, a category of municipal bonds earmarked for water-related projects. Officials said the BMC is considering raising up to Rs 10,000 crore through blue bonds to fund projects such as sewage treatment plants (STPs), water supply augmentation, wastewater conveyance tunnels, and treatment facilities.For transport infrastructure, the BMC is examining toll-backed bonds for the northern extension of the Mumbai Coastal Road. Such bonds would be serviced through future toll revenues, officials said. It is likely that the BMC may announce the same in its upcoming budget 2026-27.If finalised, the move would mark a significant departure from the BMC’s traditional reliance on internal surpluses and bank deposits, positioning Mumbai’s civic body among large urban local bodies tapping capital markets for infrastructure financing.An official said, “Discussions on it were on for the past 6 months, considering the many big-ticket projects that are in the pipeline.” Despite being India’s richest civic body with an annual budget of approximately Rs 75,000 crore last year, the BMC so far never issued a municipal bond to raise funds from the capital market, as it earns heavily from property tax, water charges, development fees, and premiums.So far, it always funded all its big-ticket projects, like the Mumbai Coastal Road constructed at a cost of Rs 1,40,000 crore, the Goregaon Mulund Link Road (approximately Rs 15,942 crore), and sewage treatment plants (Rs 30,000 crore, through its own surplus and bank deposits. At any point, the BMC holds fixed deposits running into tens of thousands of crores, which made borrowing seem unnecessary, officials said.However, considering the mounting liabilities of the BMC at this point, the civic body decided to move in this direction.“Back in January 2021, there were discussions to float ‘Municipal Infrastructure Bonds’ to raise money from the market and pay for big-ticket infrastructure projects. The BMC back then expected to raise around Rs 3,000 to Rs 4,000 crore from these bonds to meet spending requirements for big-ticket projects from 2023 onwards. However, this never took off,” said an official.
